Supreme Court Directs CBDT to Decide within 3 Weeks on IT Exemption to NRIs

Supreme Court Directs CBDT to Decide within 3 Weeks on IT Exemption to NRIs

The Supreme Court of India (SC) directed the Central Board of Direct Taxes (CBDT) to decide on income tax exemption to Non-Resident Indians (NRIs) within 3 weeks for the financial year 2020-21 in the wake of the COVID-19 pandemic

The SC bench headed by Justice UU Lalit on 10 February 2021 issued directions to the CBDT on the petition filed by an NRI seeking a direction that his "non-resident status" for purposes of the IT Act be maintained for the financial year 2020-21 regardless of the number of days spent in India on account the pandemic, and he is immunized from liability to pay tax in India on his global income for the present financial year.

The Top Court stated that since the previous year 2019-20, benefits were granted by CBDT through its circulars, it would be appropriate for the petitioner to approach CBDT.

The Court asked the petitioner to make a representation to CBDT in three days and it directed CBDT to decide the said issue within three weeks. After the directions of the SC, expectedly CBDT may soon release a circular clarifying the exclusion of FY-21 for determining the residential status.

Gaurav Baid (petitioner), an NRI presently based in Dubai, United Arab Emirates, filed a plea before the SC. He came to India in March 2020 on a visit and was able to travel back after 182 days in India in 2020-21 due to the pandemic.

Due to the extended stay in India, the petitioner feared that he may lose the NRI status under the Income Tax Act, 1961 (IT Act), as it will expose him to global income to tax in India.

The Home Ministry and the Civil Aviation Ministry had suspended international air travel for the most part of FY2020-21. As a consequence, many NRIs had to extend their stay in India. This is the problem highlighted by the present petition.

On 8 May 2020, the Finance Ministry had issued a clarification for FY 2019-20, on the aspect of residency under Section 6 of the IT Act wherein various relaxations were provided to NRIs who could not travel back to their country of work/residence because of the lockdown. No such clarification has been provided till date for FY 2020-21.

It was submitted by the Senior Advocate Mukul Rohatgi that this issue is affecting a huge number of people in India, as the NRIs are unable to leave the country. The senior advocate requested to issue a notice to the government mentioning that the business of the NRIs will be affected and it will create havoc.